What Should I Do if I Owe Back Taxes?

First, make sure all your tax returns are up to date. Before the IRS will consider releasing an IRS levy or lien, an installment agreement or an offer in compromise, all your tax returns must be filed. The same is true with filing bankruptcy. Your tax returns must be up to date if you file bankruptcy. If you have not filed your taxes in several years, the process can seem overwhelming. At the Rothrock Law Firm, we start by having you execute a power of attorney with us so that the IRS will be required to contact us rather than contacting you directly. We then order all your tax information returns from the IRS for the years that you did not file. We prepare the returns based on the information provided by the IRS and adjust the expenses according to the information you provide us. If you did not owe any money for the years that you did not file, you will not have any penalty or interest for those years. Believe it or not, it is also possible that you could be eligible to get a refund if the return was due in the last three years. If you end up owing money, we examine the different options.

First, we look at whether or not the taxes are actually owed. If they are not owed, we might be able to amend the return, appeal the IRS claim, or submit a request for reconsideration depending on when the tax was assessed. If you owe the money, we look at the best method of repaying the money, such as filing bankruptcy, submitting an offer in compromise, proposing an installment agreement, proposing a penalty abatement, or placing your account on currently not collectible status. If you qualify for bankruptcy or the offer in compromise, you might be able to resolve the back taxes owed for pennies on the dollar and/or you might be able to eliminate part of the penalties and interest. If you do not qualify for bankruptcy or the offer in compromise, you might be able to pay back the amount owed in an installment agreement. If you do not have the means to pay back the taxes in an installment agreement, your account might be able to be placed in a “currently not collectible” status. While you are in currently not collectible status, the IRS will not collect money from you. Be aware, however, that penalties and interest will continue to accrue so you should consider this option as a short term option only until you qualify for one of the other methods.

Should I file my tax return every year even if I am not required to file?

Yes, you should file your tax return every year even if you are not required to file. Filing a tax return triggers the statute of limitations period. If you file your return, the IRS has three years from the date you file your return to audit you and assess any taxes owed. Limitations doesn’t start to run until you file the return.

What will the IRS do if I owe back taxes?

Unfortunately, the IRS might not do anything for several years and then, out of the blue, you get a letter from your employer that the IRS intends to levy your wages. The IRS might have attempted to contact you at your last known address, and you did not get the message. By then, your options become more limited because you probably threw away receipts or other items that could have lowered your taxes. Although we can still accept your case if this occurs, you might end up paying more money. If you ignore the notices that you get from the IRS, they can place a lien on your property or a levy on your bank accounts or wages. It is imperative that you take action as soon as possible if you owe the IRS.

What is the statute of limitations for the IRS to collect back taxes owed?

The statute of limitations is the deadline in which someone can legally enforce a claim against you. There are different rules for different scenarios. Please visit our statute of limitations page to see the various rules.